The Petroleum Ministry plans to infuse 50 per cent domestically manufactured content in all public sector oil and gas contract.

While keeping the contract open for bidding by all, public sector undertakings (PSUs) has to specify a certain percentage of required domestic content in supplies of goods and services — those providing local content product as well as those supplying pure imports.

“Under the WTO National Treatment on Internal Taxation and Regulation, any discrimination to imports in comparison to domestically manufactured goods is inconsistent with the obligations undertaken by the member countries, including India,”

Though WTO rules provided an exception for PSUs, but it is limited for products purchased for “immediate and ultimate consumption in governmental purposes and not otherwise for resale or use in the production of goods for resale”.

RBI to Absorb Excess Liquidity

In News: The Reserve Bank of India (RBI) has said banks have to maintain 100 per cent cash reserve ratio (CRR) for the deposits they have received between September 16, 2016 and November 11, 2016 to absorb excess liquidity in the banking system following demonetization.

What is Liquidity?

Liquidity is basically how “easy” one can convert any asset into cash.

It is also an ability to buy or sell a security without affecting the asset’s price.

Cash reserve ratio (CRR)

CRR is the proportion of deposits that banks have to keep as cash with the central bank (RBI).

Banks do not earn any interest on CRR balances kept with the RBI.

It is intended to absorb a part of the surplus liquidity, while leaving adequate liquidity with banks to meet the credit needs of the productive sectors of the economy.

New Norms

The RBI has asked banks to set aside 100 per cent of the deposits accrued between September 16 and November 11 as incremental CRR.

Incremental CRR is a temporary measure to drain excess liquidity following demonetization

What is incremental CRR?

The incremental CRR prescribes the reserve ratio based on the extent of growth in deposits.

It immobilizes the fast-growing liquidity from where it is lodged.

In the late 90s, a 10 per cent incremental CRR was in vogue on the non-resident deposits to regulate (reduce) the flow of funds from overseas Indians.

Reason Behind this Move

First, the surplus in the banking system, at about 5 lakh crore, was moving closer to the maximum absorption capacity of the central bank.

The RBI has only 5 lakh Crore of government securities (G-Secs) to absorb banking system surplus through the reverse repo window prior to the demonetization drive.

For absorb further liquidity this option cannot be viable.

Other liquidity-absorption measures like Market Stabilization Scheme (MSS) bonds are too small given the liquidity-absorption requirement.

As the funds parked by banks with the Reserve Bank of India (RBI) under the reverse repo facility surging the government security rate had fallen below the repo rate of 6.25 per cent.

This liquidity-absorption measure could reverse some of these distortions.

Market Stabilization Bonds

In 2003-04 government issued a new category of bonds specifically to offset the impact of excess liquidity.

In case of normal borrowings by the government money goes to the Consolidated Fund of India.

Funds collected under MSS cannot be used by the government for its own expenditure, and would be maintained in the public account.

RBI has revised the ceiling on MSS to Rs6 trillion, from the previous limit of Rs30, 000.

Committee to promote digital payment system

The government under NITI Aayog set up a 13-member committee to formulate a roadmap to implement measures that promote digital payment systems and move towards a healthy financial ecosystem.

Chandrababu Naidu, Chief Minister of Andhra Pradesh, will be the convener of the committee which includes five other Chief Ministers.

Other members include NITI Aayog Vice-Chairman Arvind Panagariya and NITI Aayog CEO Amitabh Kant who will also serve as the Secretary of the Committee.

It shall evolve an action plan to reach out to the public at large with the objective to create awareness and help them understand the benefits of such a switch over to digital economy.

The committee has also been commissioned to identify and address bottlenecks pertaining to adoption of steps required to move towards a digital payment economy.

Vittiya Saksharata Abhiyan

It is launched by Union HRD Ministry.

‘Vittiya Saksharata Abhiyan’ to encourage, creates awareness and motivates all people around them to use a digitally enabled cashless economic system for transfer of fund.

The Classic IAS Academy is a leading institute based in Delhi. The institute offers Top IAS Academy in Delhi. The institute gives importance to social responsibility, leadership development and brainpower development. The dedicated team members offer complete guidance to its aspirants. The guidance is based on all the parameters set by the UPSC.